Southwest Voters Loosen Reins on Debt

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Southwest voters Tuesday rejected a ban on issuing state debt in Colorado, eliminated interest rate caps on public debt in Arkansas, rejected budget-balancing measures in Arizona, and approved $1.74 billion of school bonds in Texas.

The worst fears of the bond industry failed to materialize in Colorado as voters overwhelmingly rejected three ballot initiatives known as Amendments 60 and 61 and Proposition 101, all of which would have reduced taxes and sharply curtailed debt. Amendment 61 would have halted all state borrowing, including short-term notes.

“Colorado voters tonight made the right choice for their state’s future,” said Ken Bentsen, executive vice president for public policy and advocacy at the Securities Industry and Financial Markets Association. “Had this amendment passed, it would have made it all but impossible for Colorado, its local governments, and school districts to fund road construction and schools in a fiscally prudent way.”

In Arizona, lawmakers must resume budget cutting after voters rejected Propositions 301 and 302, which would have shifted $500 million from voter-approved programs to the general fund.

Proposition 301 would have taken the money in a land-conservation fund enacted by voters 12 years ago.

Proposition 302 would have ended the voter-approved Arizona Early Childhood Development and Health Board under a program known as First Things First. With the failure of the two measures, Arizona’s estimated deficit grows to $1.3 billion from the current $825 million, and the state no longer has the capacity to do short-term borrowing.

Arizonans approved Proposition 106, which will allow them to opt out of any federal or state health care mandate, and also banned affirmative action.

Arkansas voters made it easier for the state and local governments to issue debt by eliminating the constitutional interest rate ceiling on public debt and loans.

More than two-thirds of voters supported Issue 2, which removes the prohibition of interest rates on state and local bonds of more than 200 basis points above the 90-day commercial paper discount rate set by the Federal Reserve Bank of St. Louis, which is currently 0.75%.

The measure will also allow local governments to issue revenue bonds for energy-efficiency projects supported by the utility savings that are achieved.

Arkansans also approved Issue 3, which loosens the requirements on state general obligation bonds for economic development projects. The General Assembly will develop criteria for allocating the bonds, replacing the requirement that eligible projects must create 500 jobs and include $500 million in private investment.

Texas voters approved $1.74 billion of GOs requested by schools,  almost 70% of the $2.5 billion of school debt on the ballot. Joe Smith of TexasISD.com said voters backed at least one proposition in 18 of the 39 school bond elections on Tuesday, with 21 districts being shut out.

The San Antonio Independent School District’s $515 million bond package, one of the largest single requests on Tuesday, won approval from more than 66% of voters. But neighboring Judson Independent School District saw its three-part $198 million bond proposal defeated.

Voters in the Houston suburb of Katy narrowly approved the Katy Independent School District’s request for $459.8 million of GO bonds by 51.9%. The fast-growing district said it would use proceeds to renovate its five oldest schools and build three elementary schools, a junior high school, and its seventh high school.

Austin-area elections saw the Georgetown Independent School District’s two-part, $137.3 million proposal win overwhelming approval, but Eanes Independent School District voters rejected a three-part, $149.5 million measure.

Just 51% of voters approved the Lubbock Independent School District’s bid for $198 million of GOs. The Tyler Independent School District’s request for $89.5 million failed by 71 votes. On city bond issues, Austin voters approved a $90 million bond package. Funded projects could be under way within a year, said Mayor Lee Leffingwell.

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